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Last Modified: 6/20/2018 Location: FL, PR, USVI Business: Part A

Outpatient prospective payment system (OPPS) for hospitals and community mental health centers (CMHCs)

Section 4523 of the Balanced Budget Act of 1997 (BBA) provides authority for The Centers for Medicare & Medicaid Services (CMS) to implement a prospective payment system (PPS) under Medicare for hospital outpatient services, certain Part B services furnished to hospital inpatients who have no Part A coverage, and partial hospitalization services furnished by community mental health centers. The provisions of this section were further modified by sections 201 and 202 of the Balanced Budget Refinement Act of 1999 (BBRA).
All services paid under the new PPS are classified into groups called Ambulatory Payment Classifications (APC). Services in each APC are similar clinically and in terms of the resources they require. A payment rate is established for each APC. Depending on the services provided, hospitals may be paid for more than one APC for an encounter.
Section 4523 of the BBA also changed the way beneficiary coinsurance is determined for the services included under the PPS. A coinsurance amount will initially be calculated for each APC based on 20 percent of the national median charge for services in the APC. The coinsurance amount for an APC will not change until such time as the amount becomes 20 percent of the total APC payment. In addition, Section 204 of the BBRA provides that no coinsurance amount can be greater than the hospital inpatient deductible in a given year.
Both the total APC payment and the portion paid as coinsurance amounts will be adjusted to reflect geographic wage variations using the hospital wage index and assuming that the portion of the payment/coinsurance that is attributable to labor is 60 percent.
CMS's final rule for the new system was published in the Federal Register on April 7, 2000 (65 FR 18434). The new system went into effect on August 1, 2000.
To find out more information about this and the impact of the Affordable Care Act (ACA) has on the OPPS market basket, please visit the CMS website external link. The website has related links to guidance, transmittals and downloads.
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